Finance and Decadence

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When a society falls into decadence all spheres of activity are affected. The degradation that comes with decadence gradually undermines morality and religion as well as finance and politics. Decadence typically does not infect one branch of human activity. It affects all branches of activity. Looking at the ongoing decline of our economic system, one might question the idea that we are experiencing a normal cycle of “corrections” and downturns. Some say we are entering into a “super-cycle.”

We see in the contemporary budgetary crises a struggle to sustain and enlarge the welfare state. We read the headline from Bloomberg, “Senate-Passed Deal Means Higher Tax on 77% of Households.” No well-informed person believes that current budget talks are going to offer any prospect of tax relief, or that government is going to bring its spending in line with its revenue. More significantly, no intelligent observer denies that the country is becoming more dependent on government. None believe that costs are going to diminish, or the economy is keeping pace with government programs.

More than seven decades ago the Austrian economist Ludwig von Mises wrote a book on Socialism in which he discussed the welfare state. Mises explained that once upon a time the Germans discovered social insurance. They saw it “as the highest point to which … political wisdom can attain.” Supposedly, social insurance would give “every citizen adequate care and the best medical treatment in sickness….” Of course, Mises points out, “No ordered community has callously allowed the poor and incapacitated to starve.” Private charities and generous individuals have serviced the poor long before the welfare state came into view. But with the intervention of the state, which no longer trusts to human kindness, Mises noted, “What was formerly charity on which the poor had no claim is now a duty of the community.”

According to Mises, social welfare insurance is problematic. People can fudge accidents and illness to acquire benefits. In fact, some people are clearly motivated to do so. As a matter of fact, at the beginning of the employment crisis in the United States in 2008-9, a workers’ compensation insurance official told me that claims had suddenly skyrocketed because people knew they were going to be laid off and workers’ compensation paid higher rates than unemployment. In other words, it was better to have an injury at work than wait for the pink slip and collect unemployment. About this kind of situation Mises wrote, “The destructionist aspect of accident and health insurance lies above all in the fact that such institutions promote accidents and illnesses, hinder recovery, and very often create, or at any rate intensify and lengthen, the functional disorders which follow illness or accident.”

It is a remarkable assertion on the part of Mises. Here is the factual basis upon which his assertion rests: “Overwhelming statistics show that insured persons take much longer time to recover from their injuries than other persons, and that they are liable to more extensions and permanent functional disturbances than those of the uninsured.” From this Mises drew a shocking conclusion, namely, “Insurance against diseases breeds disease.” He argued that if the “will to be well and efficient is weakened, illness and inability to work is caused.”

This controversial thesis is seconded by the remark that the “psychic forces which are active in every living thing, including man, in the form of a will to health and a desire to work, are not independent of social surroundings. Certain circumstances strengthen them; others weaken them,” wrote Mises. It is therefore no accident that a host of neurotic illnesses have appeared in which the malingerer can find refuge. (This theme was explored in a controversial book by Dr. Thomas S. Szasz, M.D. in The Myth of Mental Illness: Foundations of a Theory of Personal Conduct.)

Today the promise of salvation is no longer evidenced by productive behavior. Salvation is guaranteed by the state, which is in the midst of creating a new political religion. Our saviors are now politicians, yet their method cannot save us because it demoralizes the economy by degrading those who are most productive as it elevates those who are least productive. Here we find morality undermined through the additional wickedness of irresponsible borrowing. Christopher Lasch once wrote, “A lust for immediate gratification pervades American society from top to bottom. There is a universal concern with the self – with ‘self-fulfillment’ and more recently with ‘self-esteem,’ slogans of a society incapable of generating a sense of civic obligation.”

We might easily substitute the word “financial obligation” for “civic obligation” in Lasch’s text. It has been argued, and should be argued again, that our character as a people is being undermined by the welfare state. Things have come very far, and our position is increasingly untenable. We have lost our sense of propriety and our sense of danger. As Lasch also wrote, “…culture is a way of life backed up by the will to condemn and punish those who defy its commandments.” In the old days, to repay a debt was a serious responsibility. To work for one’s sustenance was considered honorable.

When a society falls into decadence all spheres of activity are affected. The degradation that comes with decadence necessarily undermines the economy. And so, it is unlikely that our present troubles are merely cyclical. We may be on the cusp of a prolonged and long-term civilizational decline.

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About JR Nyquist